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AMD to Lease Singapore Subsidiary

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Advanced Micro Devices, Inc. (AMD - Free Report) has signed a conditional put-and-call option agreement to sell its Singapore subsidiary, Advanced Micro Devices (Singapore) Pte Ltd. and lease it back. It will not only generate additional funds but also diversify its business beyond the struggling PC industry.

The company has decided to sell its Singapore facility to HSBC Institutional Trust Services (Singapore) Limited. The transaction will be closed after the final approval of the JTC Corporation (JTC), the Singapore entity tasked with managing the country's industrial infrastructure.

Following the deal, AMD would enter into a 10-year sub-lease to continue its operations in a portion of the facility.

Upon the completion of the deal, the company expects to generate approximately $46 million (59 million Singapore dollars). During the third quarter, AMD expects to record a gain of approximately $16 million. The proceeds will likely be reflected in the company's third-quarter 2013 financial statements when reported on Oct 17, 2013.

The sale is yet another effort by the company to reduce investments and capital in non-core parts of the business, including real estate. In March, the company signed an agreement to divest its campus in Austin for approximately $164 million in cash.

AMD is the world's second-largest maker of microprocessors. In the last reported quarter, AMD’s top-line numbers were better than its guidance, supported by new products and strong mobile design wins. Also, the company’s bottom line beat the Zacks Consensus Estimate.

Worldwide PC sales have been stagnant in recent times while smartphones, tablets and other mobile devices have witnessed strong growth. Therefore, AMD is providing chips for game consoles to lessen the company’s dependence on the declining PC market.

Also, the company plans to diversify its business into new embedded markets, including communication, industrial and gaming among others. It expects to increase revenue contribution from its embedded business and increase market share

Currently, Advanced Micro has a Zacks Rank #2 (Buy). Other stocks that are performing well at current levels include SanDisk , Syntel Inc. (SYNT - Free Report) and Silicom Ltd. . All these stocks carry a Zacks Rank #1 (Strong Buy).

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